Dear Carrie: I'm about to graduate from college and have landed my first job. It doesn't pay a lot, but it's in my field. From a financial perspective, what are my first moves? --A Reader
Dear Reader: Congratulations on what sounds like a promising start to your career. And congratulations, too, on wanting to use your money wisely. Your first moves -- both in your career and in your finances -- can be crucial down the road. It doesn't matter how much money you make to begin with, but it can matter tremendously how you use it.
Managing your money starts with your values and goals. But even in a vacuum, there are some financial steps that I consider essential not only for someone at your age -- but for just about anyone at any age.
LIVE WITHIN YOUR MEANS--OR EVEN BELOW
A budget may sound boring but having one and sticking to it is the foundation of smart money management. So even before you receive your first paycheck, figure out how far it will go. Estimate what your take-home pay will be. Then write down all your necessary expenses. Include things like rent, food, utilities, phone and Internet, transportation, medical bills, student loans -- anything that you absolutely must pay each month.
Will your paycheck easily cover these costs? If you think you'll have money left over, don't immediately envision a bigger apartment or a better car. That extra money will become the key to your financial security.
START AN EMERGENCY FUND
The first place to put any money not spent on essentials is in an easily accessible savings or money market account. Ideally, you want to keep enough to cover at least three months essential living expenses readily available so you're not blindsided by an unexpected illness or a change in job status. If you can put aside enough to cover six months, so much the better.
MAKE SURE YOU HAVE INSURANCE
Chances are you'll be able to get health insurance through your employer. If not, look for a low-cost, high deductible policy. With today's soaring health costs, this is a must. So, too, is car insurance. The only other insurance I'd suggest for you is possibly renters insurance. It's typically quite inexpensive and will cover your personal property in case of fire, theft or vandalism.
DON'T BE DERAILED BY DEBT
Credit cards are a convenience -- and a curse. Keep debt under control by having only one credit card, and use it only when necessary. It's much easier to overspend when you just hand over the plastic. Make a commitment to pay cash for most everything. If you do have to charge something, pay the balance off every month.
SAVE FOR THE PRESENT--AND THE FUTURE
To me, saving is exciting. Especially when you know what you're saving for. So make a wish list. What do you want short-term? A new computer? A big night out? Now think about longer-term goals, such as a major vacation or the down payment on a house.
Writing down your goals and putting a dollar amount next to each is an important part of effective saving -- and ultimately effective money management. It helps you plan, figure out your priorities and spend wisely. And it gives you an opportunity to reward yourself when you accomplish one of your goals -- a great motivator to keep saving.
When it comes to long-term goals, even at your age, I recommend putting retirement at the top of your list. Contribute to an employer-sponsored plan such as a 401(k), at least enough to get any company match. If a company plan isn't available, open an IRA. You won't regret it. Start saving for retirement now, and you can put aside as little as 10 percent of your annual salary for the rest of your working life and be on the right track.
First, open the right accounts. A checking account with ATM access is pretty much a necessity, as is a savings account. Look for accounts that don't charge monthly fees, and consider linking them so you can save a certain amount automatically each month. You might also set up automatic payments for your bills.
Then create a system to keep track of your financial details. Whether you use paper files, electronic documents or a combination of the two, organize them by categories such as bank accounts, tax records, debt, household, insurance, etc.
Once you have your financial feet on the ground, you can think about opening a brokerage account and learning about investing, but one step at a time. Make these initial financial moves and you'll be on the right path -- let's hope to an even brighter financial future!
Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER(tm), is president of Charles Schwab Foundation and author of "It Pays to Talk." You can e-mail Carrie at email@example.com. This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. To find out more about Carrie Schwab-Pomerantz and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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